Statement of Michael B. Enzi
Addressing the Turmoil in our Financial Markets
October 1, 2008
Mr. President, I rise today to speak about the historic vote that will occur today on the Emergency Economic Stabilization Act of 2008. Members of Congress and the U.S. Treasury Department have spent the last two weeks debating a response to the declining U.S. credit markets and a plan to get America’s economic machine running again. The final product is a far cry from the Treasury’s initial three-page proposal. However, I am still not convinced that this is the best solution for our country.
Throughout this debate, I have listened to arguments from both sides. I studied this legislative proposal line by line, and tried to measure the benefit this legislation would bring to our financial markets against its enormous cost to our taxpayers. Ultimately, I do not believe this is the best solution for our economy or the taxpayer. Has Congress been rushed? Have we decided to do something, anything, even if it's wrong because of the dire warnings of an economic apocalypse? Yes, but in this case the wrong proposal is just too costly for our country in terms of dollars and in terms of our economic future. Something does need to be done to save our economy, but this package is just a very costly band-aide for big banks that will do very little to help patients who needs major surgery.
Had Congress been able to use the regular committee process to craft a bipartisan and comprehensive legislation, the resulting bill may have gained my support. Unfortunately, Congress has been pressured into passing this bill in two weeks by Treasury and Wall Street. A rescue plan of this scale requires a clear plan of action with a substantial chance of success. This plan has neither.
When Treasury Secretary Paulson and FED Chairman Bernanke first came to the Hill to ask for help, my colleagues on the Senate Banking Committee and I told him that even his dire warnings of a global economic meltdown would not allow us to give him a blank check. Since that time, the markets have soared and plunged on each new development out of Washington. But the warnings about global collapse have not been realized yet, and I pray that they won't. By passing this legislation are we vastly underestimating the resilience of our markets and overestimating the need for this legislation? This does not provide us with any measurable goals for success.
This plan inadequately addresses the root cause of our market crisis, home foreclosure. Without addressing the root of our economic problem, I have little confidence that it will be successful. I cannot vote for a bill to authorize $700 billion in taxpayer money without a substantial chance of success.
What I was hoping for was a solution that would get closer to the real problem and to the people. The housing crisis accelerated the financial problem. The response was to bailout banks and investment firms and forget the hurting homeowner. That's still what we are doing while claiming to make the credit market more liquid using taxpayer money. The public still sees it as a big bank bailout.
In addition, this plan offers no clear plan to solve our market crisis. I questioned Secretary Paulson and Chairman Bernanke about the asset purchase program last Sunday, and again during the Senate Banking Committee hearing last Tuesday. I did not receive satisfactory answers, and many doubts about this program still remain. The primary purpose of this program is to find the true value of these mortgage assets through a Treasury purchase program. Yet this legislation provides no details on how that process works, who will participate, and how these assets will be priced.
I understand why many of my colleagues voted for this bill and why some of my constituents encouraged me to do the same. This was one of the hardest decisions I've ever had to make as a senator. I hope that, if this bill ultimately passes, that it does help. I really do. I know this economic hole is dark and there is a real risk of many Wyoming people suffering, but I believe there are other steps that we could try before jumping off a cliff $700 billion high.
I will continue to work with my colleagues to craft comprehensive, accountable, and common-sense reforms to our financial markets. We must consider reforming the fair value accounting method when there is no market. The current rules prevent banks from understanding the true price of their assets in the long term. We need to enact reforms that make federal financial regulation more efficient, vigorous, and transparent. The role of Fannie Mae and Freddie Mac also needs to be re-evaluated in order to restructure the mortgage market from the bottom up. Finally, we should consider changes to our tax code, including capital gains and mortgage interest deduction, which will encourage liquidity in the marketplace. Another idea would be to expand the tax credit to those buying up foreclosed homes or homes on the market over 180 days.
The best way to solve this problem was to never get in the situation in the first place, but at this point that is not an option. Further disruption of our free market system by rewarding bad decisions with taxpayer money will only make this problem worse. That is why I oppose this legislation. We've got a lot more work to do and I look forward to working with my colleagues to reform our financial markets to ensure this situation never happens again.